5 Harmful Credit Repair Actions

harmful credit repair mythsHaving a good credit score is essential to your personal financial well-being. With so much information on how to repair credit, how to raise credit scores and how to get credit.

It gets difficult to know what advice is good and what advice is not so good when it comes to repairing your credit and raising your scores.

Here are five actions that on the surface sound good and may seem logical in repairing your credit but may actually result in a lower credit score. Be mindful in credit repair there is not always a “one size fits all approach.”

1. Dispute all negative items in your credit report
The dispute process is vital to repairing your credit. Errors and inaccurate information should be disputed, but not all at once. Many consumers do a blanket dispute of all negative items and in some instances are successful in their efforts.

The problem arises when those disputes are later verified and reappear on your credit report. A creditor may not respond to a dispute within the allotted 30 days but respond some time later.  The negative item can be reinserted if the creditor can prove the accuracy of the item.

The best way to go about credit repair is to base your dispute on factual errors and back the dispute up with proof, when available. Dispute a few errors at a time instead of bombarding the credit bureaus all at once. Disputing a few items every 30 to 60 days decreases the likelihood the credit bureaus will flag your disputes as frivolous.

2. Cancel inactive accounts to help your score
The length of time of your credit history comprises 15% of your credit score. Closing an inactive or outdated account causes the length of time you have had credit appear shorter. Canceling an old account will not only lower your credit score, but also reduce the total amount of the credit you have available to you. It will cause your credit report to appear as though you are utilizing a higher percentage of your available credit. Read more about retaining old credit accounts.

3. Not using your credit cards
If you have credit cards you should use them. Yes, I said it! Use your credit cards if you want to build your credit history and raise your credit score. Credit cards reflect your ability to handle your finances and manage debt responsibly. Putting your cards away for emergencies and rarely using them could negatively affect your credit score.

Credit card issuers are lowering credit limits and even closing accounts that are not used. These actions can hurt your credit score. I am not advocating you go overboard and use your credit cards unwisely but I am advising you use your credit cards occasionally, make timely payments and keep your balances low. Never utilize over 30% of your available credit limit unless you plan on paying off your balance in full.

4. Credit counseling can hurt your credit score
Once upon a time credit counseling weighted negatively in the FICO credit scoring system. Now, FICO no longer calculates credit counseling into your credit score although a notation of the credit counseling service may appear on your report. As long as you are making timely payments and reducing your overall debt, your credit score will not suffer. But if you miss a payment your credit score will suffer.

5. Credit inquiries harm your credit score
Inquiries alone have minor effect on your credit score. If your credit history is already less than perfect than a hard inquiry will not make your credit score any worse. Having a good credit record and applying for many credit cards at once can affect your ability to obtain new credit because a lender may interpret it as an indication of financial trouble.

But if you are seeking a car or a mortgage loan and experience several credit inquiries within a 14-day time-frame, the credit bureaus will not severely ding your credit score.

Learn how to begin the process of credit repair or if you do not have the time commitment to repair your own credit, Lexington Law helped clients remove 1,297,226 negative items in 2010. Call for a free credit repair consultation today (877) 587-4574.

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